BoE: the worst is over

Financial conditions are set to improve in the coming months as investors recognise that prices in credit markets now overestimate risk, the Bank of England said on Thursday.

In its latest Financial Stability Review, the Bank said that estimates implied in some credit markets are likely to overstate significantly the losses that the financial system and the real economy will ultimately incur because of their use of mark-to-market accounting practices to value illiquid securities.